US and EU Economic Sanctions Increase Russian Halal Market Gains

In the days of Ramadan 1435 and afterwards Russia has become a frequent player on the international political scene. Moreover, with economic consequences, given US and EU sanctions against Russia. Lets make a short overview on how those limitation impacted or can impact the Russian economy, and especially the young and developing halal market in Russia.

The USA and the European Union has recently imposed sanctions in three main areas — banking sector (limitations for the operations of the Russian banks), trading in weapons (mainly Russian export to the EU and US markets), and oil industry. The sanctions also included general goods of double purpose, mainly regarding goods imported to Russia. It goes without saying that Russian oil companies, forming significant part of the Russian economy are the ones that are to suffer most from the sanctions. At the same time big European stockholders in some of the Russian oil producing companies (like BP In Rosneft) add up controversy to the situation.

Yet the nation’s economy as well as the general population are not that dependant on that. According to the comments of the majority of the Russian analists, the Russian economy will suffer from the sanctions, especially it will hit the investment climate. But European countries as well will feel the negative impact from the sanctions. It is of common knowledge that Russia has economic and trade partners in various parts of the world, including CIS and China. It is also evident that Russia in the last 14 years Russia has moving forward to developing relations with the Arab world slowly trying to revive the volume of the trade turnover with the region which used to be between the regions during the Soviet time.

Still let’s see what’s the reaction of the Russian halal market. The beginning of June traditionally demonstrated Russian growing potential in the halal industry. Moscow hosted the fifth Moscow International Halal Exhibition — Moscow Halal Expo 2014 — a platform for trade promotion, B2B meetings, experts forums and investment opportunities presentation, with about 200 participating companies from over 30 countries. While few halal producers from Europe took part in the Expo, the companies from the East and CIS had shown great interest thus stressing their strategic plans for trade and investment cooperation with the Russian halal market. The biggest booths were occupied by Thailand, Turkey, Indonesia and Kazakhstan. Among international brands were Alokozay, Ekol, Tekbir, Asfour, Bateel, Nakheel Palestine etc. At the same time the Russian internal halal market was represented by over 120 companies which stands for the fact that the Russian halal producers are oriented in a huge extent to the internal market. Moreover, on the production side, there is hardly any link to the EU or US markets. Thus sanctions cannot hurt the halal market of Russia.

“The halal producers of Russia are using natural ingredients produced in the local market. Hardly any ingredient is imported, especially from Europe” — stated Aydar Gazizov, general director for Halal Standardisation and Certification Centre under Russia Muftis Council. The main halal producing companies from various sectors supported this position.

Nadir Valitov, head of fast growing company “Tatar pies” developing through franchise and having over 50 outlets in Moscow, is confident that sanctions will have no impact over his business: “All components of our products are 100 per cent natural and produced on the local market”. Ilyas Yangurazov, head of meat producing company “Ekoprod” has the similar opinion. “Our business has no connection to the foreign markets”, he said. But companies importing halal products from the EU also had no worries about the sanctions. The official distributor of “Halal 7 cola” Yury Kalinin, founder of Ecorusimport company felt no impact of the sanctions. Igor Kramchaninov, general director of Digidon company, one of the biggest distributor of the halal household chemical goods, is of the same opinion. The only sphere which has always been influential on the Russian companies using imported materials is the exchange rate volatilities. All international contracts have the price in USD of euro.

Therefore in case rouble declines compared to a dollar, this impacts the price of the products. Thus, Maria Smorchkova, director for development of IRADA company, one of the major Islamic clothes producer in Russia, mentioned that all clothes producers in Russia are dependent on the exchange rates, as the fabric and textile is imported from Turkey, China or other countries. Therefore, in case of currency volatilities cost of the products rise.

Thus, the halal market in Russia which is mainly based on local production and distribution, has little economic connection to the European Union, and US especially.

At the same time development of economic and trade relations with the countries of the East and the Middle East can bring new halal products and technologies to Russia, and closer investment ties are to promote Islamic finance and investment, which could result in creation of new production plants, technology centres and other infrastructure points, which could contribute to a better life level of the Muslim and general Russian community.